Roll on 2013

Chris Hamilton APCA CEOAt this time of year, when Australia traditionally heads for the beach, there are probably not too many people thinking about the future of our payments system – and rightly so. But this year, the Real-Time Payments Committee, comprising senior bankers and chaired by industry veteran Jennifer Fagg, has been working right up to the Christmas bells. With APCA support, the Committee has been putting the finishing touches on a proposal for new real-time payments architecture, which is now with the Reserve Bank.

The intention is to publish the proposal as soon as the Payments System Board has a chance to consider it, which won’t be until mid- February. But if the PSB is supportive, then industry collaboration on the proposal needs to get going promptly if we are to meet expectations set last June in the Conclusions to the PSB’s Strategic Review of Innovation in the Payments System. Preparatory work is already under way. Given we don’t build new payment systems every day, this should make for an interesting 2013.

Something I often reflect on this time of year is the hard work and professionalism of APCA’s staff and member reps. Getting competitors to work together is never straightforward, but when it comes to payments, APCA is the place it happens. I think the collaboration has been outstanding this year, leading amongst other things to completion of a new communications network for payments, the COIN, new settlement infrastructure for low value payments through the Reserve Bank’s Low Value Settlement Service, and a new account switching service. Most staff and member reps are now enjoying well-earned breaks, but I wanted to express my appreciation for their efforts in 2012.

A Happy New Year to all.

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Plastic card fraud trends – the ups and downs

Australian credit cardThe latest payments fraud data released by APCA earlier this month show an indication that fraud on Australian-issued plastic cards may be on the decline.

On 11 December, APCA released payments fraud figures for the 12 months to the end of June 2012. The figures show that over the past year, fraud on all plastic cards increased from $238.8m to $276.7m. However, when compared with the 2011 calendar year release, the figures show a decline in card fraud. (See the table below.)

APCA publishes 12 months of fraud data every six months therefore there is a six-month overlap in consecutive data releases. While APCA uses year-on-year comparisons to monitor fraud trends, comparisons with the preceding release can provide a useful snapshot of most recent fraud activity.

Last year’s well-publicised hacking attacks led to a significant increase in skimming and CNP fraud during the second half of 2011, which is reflected in the year-on-year comparisons. These frauds are captured in APCA’s latest data release as well as the 2011 calendar year data released in July 2012.

Countermeasures were already well underway during the first half of 2012. Thousands of merchants made system fixes to prevent unauthorised access to customer data, financial institutions re-issued cards to customers affected by the security breaches, and police arrests were made. The effectiveness of these measures can be seen in a decline in fraud when comparisons are made to the 2011 calendar year.

This is the first time since APCA started publishing fraud data in 2006 that a comparison with data released six-months earlier has shown an indication that fraud may be on the decline. APCA hopes to see a decline in the year-on-year figures when it releases the 2012 calendar figures mid next year.

APCA’s fraud statistics are available at

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Delegation from Payment and Clearing Association of China (PCAC)

Payment Clearing Association of ChinaOn 11 December 2012, APCA hosted a visit from a delegation from the Payment and Clearing Association of China (PCAC). Mr Yang Zhining, Director of General Administration (PCAC), Ms Wang Fang from the Payment and Settlement Department of the People's Bank of China and Mr Zhang Aimin, General Manager of Business Management from China Union Pay learned about the history of APCA, payments system development in Australia as well as issues relating to governance and membership.

The PCAC was founded in 2011 as a national not-for-profit organisation serving as a self-regulatory body of the payments system in China, operating under the guidance of the People's Bank of China (the equivalent of Australia's Reserve Bank of Australia). The Delegation expressed an interest in further cooperation with APCA in relation to sharing information of mutual interest as well as shared challenges facing self-regulatory payments system bodies such as APCA and PCAC.


APCA Farewells Inaugural Stakeholder Forum Chair

Anne HurleyAnne Hurley has resigned her position as inaugural Chair of the APCA Stakeholder Forum. The Stakeholder Forum was established as a replacement for the APCS (cheque) and BECS (direct entry) Advisory Councils and provides a robust forum for engagement between APCA and a wide group of stakeholders.

Ms Hurley chaired the first two meetings of the Stakeholder Forum held in 2011 and 2012 and has been critical to the success of the Forum.

Ms Hurley has been appointed as General Manager, Stakeholder Engagement with NBN Co. and we wish her well in her new role. APCA has commenced a process for replacing Ms Hurley.


BECS Intraday Settlement

APCA has formally committed the industry’s target date for moving to five intraday settlements in the direct entry system by December 2013. This represents a major enhancement of that system and is in line with the initial strategic objectives outlined in the RBA’s Strategic Review of Innovation in Payments: Conclusions.

In the Third Quarter 2012 Payments Monitor, APCA CEO Chris Hamilton outlined the Australian payments industry’s move towards five intraday settlements of direct entry and the impact of this improvement for payment system users.

Click here to watch the video

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ATM Statistics – Are We Slipping Back Into Our Old Ways?

ATMThe introduction of ATM direct charging in March 2009 has been one of the more public experiments in consumer behaviour within Australian retail payments. With three and a half years of statistics now available, we are developing a clearer view of its impact.

On the supply side, direct charging has accompanied a rise in the number of ATMs. There were 25,000 ATMs in Australia in mid-2008 and now there are over 30,000.

Despite more ATMs, direct charging has also seen a contraction in the number of withdrawals, with a drop by about 30 million withdrawals between 2008-09 and 2009-10. While this decline coincides with the GFC, the average withdrawal amount rose slightly during this period - suggesting slightly fewer but slightly larger withdrawals from ATMs as a response to direct charging.

Year ATM Withdrawals Average Withdrawal ($)
2007-08 851m $173
2008-09 861m $177
2009-10 829m $180
2010-11 830m $180
2011-12 843m $181

There have been other consumer responses. One has been the embrace of EFTPOS cash-out. Prior to direct charging less than 20 per cent of cash withdrawals were EFTPOS cash-out.

However, the most dramatic change has been the shift away from foreign ATMs towards own institution ATMs.

Upon closer examination, there appears to have been three phases. The first phase was a sharp spike with the introduction of direct charging in March 2009. From February to March 2009, the number of “own ATM” transactions as a percentage of all ATM transactions jumped from 55.5 per cent to 61.8 per cent.

The second phase saw this new paradigm holding firm and indeed a gradual increase in own ATM use, peaking in March 2011 at 62.6 per cent of all ATM transactions.

However there now appears to be a third phase, where own ATM use appears to be slipping back below 60 per cent of all ATM transactions. The figures between March 2011 and September 2012 suggest the initial “sticker shock” of the direct charge and the associated behavioural change is starting to wear off. Another year or so of data would confirm this.

Source: RBA

If this hypothesis is correct, then consumers are indeed slipping back into their old ways. It suggests, not surprisingly, that responses to a new pricing has an initial response, then a gradual adjustment of behaviours in response but, as time passes, the effects of the new pricing eventually wear off. Slowly but surely consumers revert back to patterns similar to those seen before the change.

A new pricing paradigm may have a short to medium term effect on behaviours but, longer term, non-price considerations may reassert. More data on direct charging over the coming years should provide an even clearer picture as to the outcome.

The views expressed in this article are those of the author, Dr Brad Pragnell, APCA Head of Industry Policy and not necessarily those of APCA or APCA members.

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Strategic Objectives for the Payments System

Strategic objectivesThe Payments System Board endorsed a set of Core Criteria that will be used by the Reserve Bank to assess the provision of “real time payments”. APCA is supporting the Real-Time Payments Committee, which is developing a proposal for the industry-preferred clear way.

The Core Criteria, released on 22 November 2012, provides further elaboration on the initial strategic objectives from the Innovation Review Conclusions and addresses high-level requirements including program governance and ongoing operation.

The PSB has also amended its strategic objectives regarding out–of-hours Direct Entry. Industry feedback, including from APCA, noted the costs associated with such a change to Direct Entry, particularly given the prospect of out-of-hours retail payments via a fast payments solution. Accordingly, the PSB amended its strategic objectives to omit this objective for the Direct Entry system and will review this aspect when a real-time payments solution is operational.

To read the RBA media release click here.


Merchant Surcharging

Reserve Bank of AustraliaThe Reserve Bank of Australia (RBA) announced further clarification and changes relating to reforms which limit merchant surcharges to the reasonable cost of acceptance.

The RBA clarified the definition of reasonable cost of acceptance to include any costs a merchant incurs in implementing fraud mitigation procedures directly associated with card acceptance. The RBA also clarified that it expected the taxi industry to be covered by the regime.

Further, the RBA announced that it would delay the implementation date for the Variation to the Standards until 18 March 2013 (from the previously announced date of 1 January 2013), to provide the industry with sufficient time to make any necessary changes.

To read the RBA media release click here.


EFTPOS Access Regime

EFTPOS terminalThe Reserve Bank of Australia announced that it would regulate bilaterally negotiated EFTPOS interchange fees on a basis consistent with other schemes. EFTPOS bilateral interchange regulation moves away from the previous “4 to 5 cents to the acquirer” limit to a bilateral interchange fee of up to12 cents paid to the issuer per transaction with no cap on interchange payable to the acquirer.

The PSB similarly made an in-principle decision to revoke the existing EFTPOS Access Regime if satisfactory access arrangements are put in place by eftpos Payments Australia Limited (ePAL). These changes are intended to enhance competition between EFTPOS and the international debit schemes by creating a more consistent regulatory regime.

Click here to read the RBA media release.


Operational Incidents in Retail Payments Systems: Conclusions

The Reserve Bank of Australia (RBA) released the Conclusions of its consultation on Operational Incidents in Retail Payments. Parties consulted included APCA, APRA and financial institutions.

The Conclusions Report noted that the RBA found “encouraging the level of industry attention to operational resilience”, though legacy system expertise and incident management were identified as areas potentially requiring attention. The RBA noted it would continue to refine the formal incident reporting for RITS members, first introduced in February 2012. The RBA also expressed support for APCA’s role in enhanced industry communication around operational incidents and encouraged industry to consider enhanced statistical collection and an industry resilience standard.

In response to the Report, the Payments System Board concluded that at present there was no need for a regulatory response to operational incidents in this sector.

To read the RBA media release Click here.

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ATM Reforms – List of Fee-Free Machines in Remote Communities

The Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP, and the Minister for Families, Community Services and Indigenous Affairs, the Hon Jenny Macklin MP have announced the list of ATM sites in very remote Indigenous communities that will provide transactions without a direct charge being levied on the cardholder. This was originally announced in May 2012 and was the result of an agreement between the Commonwealth Government and industry stakeholders.

The ATM sites were chosen on the following criteria:

  • Location in very remote Indigenous communities based on indicators of remoteness provided by the Australian Bureau of Statistics;
  • Location in a community store (and not in venue that provides alcohol or gambling services); and
  • Where the residents of these very remote Indigenous communities lack access to an alternative retail banking service, such as a financial institution branch, financial institution ATM or post office.

The list includes 79 ATM locations, including 42 in the Northern Territory, 18 in WA, 10 in Queensland and 9 in South Australia. The full list can be found on the Government’s Competitive and Sustainable Banking Website.

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